Does it really make financial sense to buy used over new?

[Dave Hess]

I buy new.

Don’t want to look a 5 used vehicles that have some things that annoy me like interior scratches, stains on seat, cigarette or perfume smell, wheels with curb rash, etc…

Some people are asking unrealistic prices for used vehicles.

 

[jetman]

buying used has saved us a lot of $.
I'm a DIYer so our vehicles never have any labor cost which also saves us a lot $.
And we pay cash, so banks aren't getting our hard earned $ either.

 

[SC Maintenance]

• 2017 Toyota RAV4 XLE, which was $25.5k new. Today after 100k miles it's got a trade in value of $13k, about $1800 annual depreciation.
• 2021 Toyota RAV4 XLE, which was $27.5k new. Today after 50k miles it's got a trade in value of $22.8k, about $1350 annual depreciation, using 3.5 years.
• Today a used 2017 Toyota RAV4 XLE with 100k miles is going for around $17k retail. If we look at a 2010 RAV4 Sport, it's worth $6600 private party, was $23.5k new so $1200 annual depreciation from new, losing 72% of it's original value. If we assume the same for a 2017 RAV4 XLE, it'll be worth $7,140. That would mean it would cost about $1,400 a year in depreciation for it's life from 7 until 14 if we bought it used at 7 years old.

This math doesn't make much sense - your looking at depreciation vs original buy price. You should compare it to replacement cost.

It cost X dollars to drive a car a year. If you buy a new car for $30K, it lasts 10 years, thats $3K per year

If you buy a used car for $15000, drive it 5 years, same $3K per year.

Then you need to try to figure out how much repairs, etc are going to cost.

The other part of the equation is this. A new Rav4 is like $38K well appointed. A new X5 is $80K. In 10 years they cost about the same.....

 

[dishdude]

I've been beating this drum since 2011, mainstream (exclude luxury brands) don't depreciate at a rate that make buying used worth it. A vehicle 6 years old with 100k on it going for 50% of MSRP? No thanks, I'll take the first half of the vehicle's life, not the second half.

 

[fantastic]

My intention wasn’t to game the system, it was to just look at what the average Joe might do, and buy something simple like a new RAV4 or Accord every 4-5 years or so and trade the old one in. Or, buy a slightly used one, and drive it for a few years and trade in to a newer used one again. Doesn’t sound like it matters all that much.

Understood & wasn't implying you were personally. If it's something you want & plan to do who am I or anyone else to say don't do it. Interestingly I can counter my own argument if the subject is not about "Value" but instead safety (doesn't sound like your position though). I just can't fathom the idea of trading in a 4-5 year old car I bought new but I've never bought new so I don't know what that feels like. Anyways, I've heard around 5 year old cars are where the value is. They still have some life left at a discounted price but that could depend on your area too. Newest car I ever bought was a 1999 Chevrolet Trailblazer in 2003-4 & it set me back around $10-11k at that time w/75k on the odometer. I put 65,000 miles on that in 1 year. Interesting times today but it sounds you want to stay as close to new as possible. I'm sure there's deals out there to be had w/1-2 year old vehicles if you're willing to travel. That's how I get some of the best deals by making a trip. May I ask how many miles you put on a vehicle in a year? Let us know what you decide.

 

[fdcg27]

I'm with you on this Nick and have made the same argument here in the past.
The cost per miles savings on used cars versus new is often illusory.
As I've also written in the past, if you buy new you get to drive the car for the best hundred thousand miles of its life, for the cost of fluid changes, a set of tires and maybe brakes along with a factory warranty for much of that period should anything catastrophic rear its head early in the vehicle's life.

 

[Rmay635703]

I buy new.

Some people are asking unrealistic prices for used vehicles.

The problem is “actual people “ rarely sell cars and when they do they are either ancient and ready to trash or newer and way overpriced.

Everything else is at some sort of vehicle reseller and mostly overpriced.

 

[macarose]

Extreme and unequal examples will always yield extreme and unequal results.

I have a 1994 Toyota Camry that I bought new which is still on the road 30 years later with over 400,000 miles on it. I also bought a then nine year old Subaru for less than $100 that stayed on the road for the next 50,000 miles and then was used as a racecar.

They're both outliers. Just two different extreme data samples among tens of million. Statistically they mean nothing.

There's a different line you should be looking at.

1) The more you know about operating and maintaining a type of machine, any machine, the less it usually costs you as long as you don't consistently buy lemons.

2) The real killers for car owners are depreciation, insurance, and repairs. New cars are far more expensive for the first two measurements. Repairs usually aren't competitive with the other two costs unless... you buy a lemon.

You can easily avoid a lemon by buying reliable cars. I have a reliability study that now has over 5 million vehicles inspected by independent mechanics since 2013.

Start there. Get the maintenance history and most of all, an inspection by a well-run independent repair shop if you're not already an expert.

 

[CKN]

My intention wasn’t to game the system, it was to just look at what the average Joe might do, and buy something simple like a new RAV4 or Accord every 4-5 years or so and trade the old one in. Or, buy a slightly used one, and drive it for a few years and trade in to a newer used one again. Doesn’t sound like it matters all that much.

As great as a resource as this forum may be-the "average Joe" takes his vehicle down to the Instant Oil Change place or the dealer and doesn't necessarily view or contribute to this forum.

 

[Nick1994]

As great as a resource as this forum may be-the "average Joe" takes his vehicle down to the Instant Oil Change place or the dealer and doesn't necessarily view or contribute to this forum.

Yup. The folks of BITOG are certainly not the average Joe.

If I really wanted to have the ultimate cheap vehicle I’d just buy a new Camry and maintain it to the T and drive it for 400k miles.

But I’m not gonna do that.

 

[ecotourist]

I bought a 3 year old BMW 528i, a very well equipped one, for about 45% of the new price. Drove it as my 'special car' for 18 years and sold it to my nephew for almost nothing. I got good value out of that car.

In the end, rust got it because its first 3 years were in a rust prone area. I hated to sell it but I don't like driving rusty cars. While I got good value out of it, maybe I should have bought a new one. I replaced it with a Tesla Model 3 SR+.

 

[duck__dodgers]

Get used to a permanent weirdo used car market until new car sales return to pre-Covid norms.

People are not buying new cars at the same rate as in the past for a host of reasons, while population keeps inching up.

Fewer new cars sold = fewer used cars to buy for a bigger population.



https://fred.stlouisfed.org/series/TOTALSA

 

[dishdude]

Yup. The folks of BITOG are certainly not the average Joe.

If I really wanted to have the ultimate cheap vehicle I’d just buy a new Camry and maintain it to the T and drive it for 400k miles.

But I’m not gonna do that.

What? We need to find you a $3k Crown Vic to take to 400k! Or a 2005 Corolla

 

[NormanBuntz]

Every case is different, but if I can buy a luxury or near luxury brand coming off a 3 year lease WITH less than 30K miles AND a documented service history, I'm happy to save $10-15,000 compared to new. But as mentioned, it also depends on cosmetics, etc.

 

[Nick1994]

I bought a 3 year old BMW 528i, a very well equipped one, for about 45% of the new price. Drove it as my 'special car' for 18 years and sold it to my nephew for almost nothing. I got good value out of that car.

In the end, rust got it because its first 3 years were in a rust prone area. I hated to sell it but I don't like driving rusty cars. While I got good value out of it, maybe I should have bought a new one. I replaced it with a Tesla Model 3 SR+.

Every case is different, but if I can buy a luxury or near luxury brand coming off a 3 year lease WITH less than 30K miles AND a documented service history, I'm happy to save $10-15,000 compared to new. But as mentioned, it also depends on cosmetics, etc.

That’s what I did last year buying my 2018 Genesis G80 for 47% of it’s new price.

Except its’ value has dropped a whole lot since last year, and it certainly won’t last 18 years

 

[Pablo]

The more comfortable you get the more nutty used looks.

When you are starting off and I was there, you have no choice. You don’t forget that.

The thing for us as a couple we do keep cars for 10 years or so typically.

The CRV may not make it to 2026 with us.

My shortest keeper was my 2014 WRX hatchback. 4 years. But I got nearly what I paid for it new. Can’t beat that!!

 

[SwampSurvivor]

New base model or something that's already fully depreciated are the ones that make sense to me ...

 

[Jdeere562]

Last new vehicle I bought was a 2018 Subaru Forester. Dealt hard over emails and waited until end of quarter. Never set foot on their turf or did a test drive. Truth be known, I had never even sat in a Subaru until they delivered it to my work. (friends called me a high stakes gambler)

I paid just shy of $23000. I paid license and tax on top myself. It all worked out and I liked the car. Granddaughter is still liking it today.

Used at the time was going for about $2000 less with 2 years and 40,000 miles on them or so. Figured to bite the bullet and get new. Then I get new tires, battery, warranty and so on. Plus buying new I knew it would be maintained as I choose. And yes, I am picky.
CVT, brake, diff oils and so on every 30,000 miles.

To each their own, but for the small difference on that transaction it made sense to me to get new. Different brands are all over the board on pricing.

 

[D60]

Trying to think here if it makes that much financial sense to buy cars used over new? Or beaters over slightly used?

• Say you bought a 2017 Honda Accord Sport for $24.5k new. Today after 100k miles it's got a trade in value of $12k, about $1800 annual depreciation.
• Say you bought a 2021 Honda Accord Sport for $25.5k new. Today after 50k miles it's got a trade in value of $20.5k, about $1500 annual depreciation (we're at the end of 2024, 3.5 years I calculated).
• Today a used 2017 Honda Accord Sport with 100k miles is going for around $16k retail. I'm not sure what the value would be after 7 more years and another 100k miles, but currently a 2010 200k mile Accord sells private party for about $5,300, and was $24k new, so $1,350 yearly depreciation from new, losing 78% of it's original value. If we assume the same depreciation for a 2017 to go 7 more years, that would mean it would cost about $1,500 a year in depreciation for it's life from 7 until 14 if we bought it used at 7 years old.

Let's look at another example:

• 2017 Toyota RAV4 XLE, which was $25.5k new. Today after 100k miles it's got a trade in value of $13k, about $1800 annual depreciation.
• 2021 Toyota RAV4 XLE, which was $27.5k new. Today after 50k miles it's got a trade in value of $22.8k, about $1350 annual depreciation, using 3.5 years.
• Today a used 2017 Toyota RAV4 XLE with 100k miles is going for around $17k retail. If we look at a 2010 RAV4 Sport, it's worth $6600 private party, was $23.5k new so $1200 annual depreciation from new, losing 72% of it's original value. If we assume the same for a 2017 RAV4 XLE, it'll be worth $7,140. That would mean it would cost about $1,400 a year in depreciation for it's life from 7 until 14 if we bought it used at 7 years old.

All of this is excluding dealer doc fees and taxes, but taxes should be relative to it's value and would apply either way whether you're buying new or used (outside of private party, depending on the state). Another thing to consider is that although my examples are of very average cars, they tend to hold their value better than some models. Also, I pulled the values above from KBB for my area (very good condition) and got the retail used price looking at AutoTrader for my area (Phoenix) and kinda averaged them together.

Another thing to consider, is that maintenance and repairs for a new/newer car should be less/minimal compared to an older car, so if we look at the depreciation being pretty linear, I'm not seeing much of a savings for buying a used car over a new one. For example, buying a 2017 Accord or RAV4 means it might need a repair/maintenance coming up soon like struts, tires, etc. which would increase the annual cost outside of depreciation.

What does this all wrap up to mean? I'm not sure it is that big of a difference in the end to make it a clear choice. Though if you need to finance the car without a large trade-in or down payment, you might need a used car to make your monthly budget work. But at the bottom dollar, I'm not sure it matters.

One more thought is to buy an old used 14yo 200k mile example of the above cars private party, say for $6k with the intention to drive the wheels off of it, until 300k miles. If that takes 7 more years and the car is worth maybe $3k at 21 years old, that's $450 a year in depreciation. But how much in annual repairs and maintenance for it's life from 200k-300k miles?

What are your guys' thoughts?

"Never go up against a Sicilian when death is on the line"

???

 

[CharBaby]

In many instances, not all, I've been able to negotiate the price of the new vehicle downward closer toward that same 2 year old vehicle/trim level that was sitting right there on that same lot with miles on'em, that the dealer was firm with on the price...If I said that right!

When I've done my homework and shopped around, I have done better IMO on the new vehicle than buying that same vehicle preowned. Often better than the same preowned vehicle that was CPO'd. Some, not all, of the best deals I've had were over the phone/internet with new car dealers that have sales people who do internet sales. Some do, some don't!

And too, it depends on whether you're buying a new compared to a preowned foreign vehicle or a domestic vehicle. There are just so many different scenarios to compare against. For example, what is the market is doing at that time, what are the deals going on in your region of the country, and from dealership to dealership in the same area?

Deals change monthly! It is said that the best time to buy a vehicle is on the last day of any month. And the closer to year end, the deal could be even better. But you may be buying a 2024 vehicle on December 31st and get a screaming deal but then the resale value my drop even more, right away! Or buy in the first quarter of the new year(winter in the northeast) when sales are slow.

Some of the best deals I've gotten on a used vehicle was from a private owner in their driveway. Screaming deal in fact but, they're few & far between and a lot of work and haggling to find them. Because everyone wants more money than their vehicle is worth. They're only worth what they're worth!